BILL NUMBER: AB 653	CHAPTERED  09/16/99

	CHAPTER   407
	FILED WITH SECRETARY OF STATE   SEPTEMBER 16, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 16, 1999
	PASSED THE ASSEMBLY   AUGUST 26, 1999
	PASSED THE SENATE   AUGUST 23, 1999
	AMENDED IN SENATE   AUGUST 16, 1999
	AMENDED IN SENATE   JULY 6, 1999
	AMENDED IN SENATE   JUNE 14, 1999
	AMENDED IN ASSEMBLY   MAY 6, 1999
	AMENDED IN ASSEMBLY   APRIL 22, 1999

INTRODUCED BY   Assembly Member Hertzberg
   (Principal coauthors:  Assembly Members Dutra and Washington)
   (Coauthor:  Assembly Member Papan)

                        FEBRUARY 23, 1999

   An act to amend Section 10133.1 of the Business and Professions
Code, and to amend Section 50707 of, and to repeal Section 50704 of,
the Financial Code, relating to residential mortgage lending.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 653, Hertzberg.  Residential mortgage lending.
   Existing law defines a real estate broker to include persons who
solicit borrowers or lenders for or negotiate loans or collect
payments or perform services for borrowers or lenders or note owners
in connection with loans secured directly or collaterally by liens on
real property or on a business opportunity.
   This bill would exclude from that definition persons employed by a
real estate broker who, on behalf of the broker, assist the broker
in meeting the broker's obligations to its customers in residential
mortgage loan transactions, where the lender is an institutional
lender, provided the employee does not participate in any
negotiations between the principals.  It would require a broker to
exercise reasonable supervision and control over the activities of
these unlicensed employees.
   The California Residential Mortgage Lending Act regulates the
making of residential mortgage loans by specified entities.  Among
other things, a residential mortgage lender licensed under the act
may provide brokerage services to a borrower, as specified.  A
licensee is restricted to a percentage level of brokerage services.
   This bill would delete that restriction.
   Existing provisions of the act relative to authorizing brokerage
services for borrowers, including a requirement that the Secretary of
the Business, Transportation and Housing Agency conduct a study on
or before December 31, 1999, on particular matters relating to those
services, are to become inoperative June 30, 2001.
   This bill would change the termination date of these brokerage
services provisions to June 30, 2005, thus extending their operation
and thereby maintaining the specific provisions requiring the
preparation of the study.  It would require preparation of an
additional report on or before December 31, 2002, as specified.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 10133.1 of the Business and Professions Code is
amended to read:
   10133.1.  (a) Subdivisions (d) and (e) of Section 10131, Section
10131.1, Article 5 (commencing with Section 10230), and Article 7
(commencing with Section 10240) of this code and Section 1695.13 of
the Civil Code do not apply to any of the following:
   (1) Any person or employee thereof doing business under any law of
this state, any other state, or the United States relating to banks,
trust companies, savings and loan associations, industrial loan
companies, pension trusts, credit unions, or insurance companies.
   (2) Any nonprofit cooperative association organized under Chapter
1 (commencing with Section 54001) of Division 20 of the Food and
Agricultural Code, in loaning or advancing money in connection with
any activity mentioned therein.
   (3) Any corporation, association, syndicate, joint stock company,
or partnership engaged exclusively in the business of marketing
agricultural, horticultural, viticultural, dairy, livestock, poultry,
or bee products on a cooperative nonprofit basis, in loaning or
advancing money to the members thereof or in connection with any
business of that type.
   (4) Any corporation securing money or credit from any federal
intermediate credit bank organized and existing pursuant to the
provisions of an act of Congress entitled the "Agricultural Credits
Act of 1923," in loaning or advancing money or credit so secured.
   (5) Any person licensed to practice law in this state, not
actively and principally engaged in the business of negotiating loans
secured by real property, when that person renders services in the
course of his or her practice as an attorney at law, and the
disbursements of that person, whether paid by the borrower or other
person, are not charges or costs and expenses regulated by or subject
to the limitations of Article 7 (commencing with Section 10240), and
the fees and disbursements are not shared, directly or indirectly,
with the person negotiating the loan or the lender.
   (6) Any person licensed as a finance lender when acting under the
authority of that license.
   (7) Any cemetery authority as defined by Section 7018 of the
Health and Safety Code, that is authorized to do business in this
state or its authorized agent.
   (8) Any person authorized in writing by a savings institution to
act as an agent of that institution, as authorized by Section 6520 of
the Financial Code or comparable authority of the Federal Home Loan
Bank Board by its regulations, when acting under the authority of
that written authorization.
   (9) Any person who is licensed as a securities broker or
securities dealer under any law of this state, or of the United
States, or any employee, officer, or agent of that person, if that
person, employee, officer, or agent is acting within the scope of
authority granted by that license in connection with a transaction
involving the offer, sale, purchase, or exchange of a security
representing an ownership interest in a pool of promissory notes
secured directly or indirectly by liens on real property, which
transaction is subject to any law of this state or the United States
regulating the offer or sale of securities.
   (10) Any person licensed as a residential mortgage lender or
servicer when acting under the authority of that license.
   (b) Persons described in paragraph (1), (2), or (3), as follows,
are exempt from the provisions of subdivisions (d) and (e) of Section
10131 or Section 10131.1 with respect to the collection of payments
or performance of services for lenders or on notes of owners in
connection with loans secured directly or collaterally by liens on
real property:
   (1) The person makes collections on 10 or less of those loans, or
in amounts of forty thousand dollars ($40,000) or less, in any
calendar year.
   (2) The person is a corporation licensed as an escrow agent under
Division 6 (commencing with Section 17000) of the Financial Code and
the payments are deposited and maintained in the escrow agent's trust
account.
   (3) An employee of a real estate broker who is acting as the agent
of a person described in paragraph (4) of subdivision (b) of Section
10232.4.
   For purposes of this subdivision, performance of services does not
include soliciting borrowers, lenders, or purchasers for, or
negotiating, loans secured directly or collaterally by a lien on real
property.
   (c) (1) Subdivision (d) of Section 10131 does not apply to an
employee of a real estate broker who, on behalf of the broker,
assists the broker in meeting the broker's obligations to its
customers in residential mortgage loan transactions, as defined in
Section 50003 of the Financial Code, where the lender is an
institutional lender, as defined in Section 50003 of the Financial
Code, provided the employee does not participate in any negotiations
occurring between the principals.
   (2) A broker shall exercise reasonable supervision and control
over the activities of nonlicensed employees acting under this
subdivision, and shall comply with Section 10163 for each location
where the nonlicensed persons are employed.
   This section does not restrict the ability of the commissioner to
discipline a broker or corporate broker licensee or its designated
officer, or both the corporate broker licensee and its designated
officer, for misconduct of a nonlicensed employee acting under this
subdivision, or, pursuant to Section 10080, to adopt, amend, or
repeal rules or regulations governing the employment or supervision
of an employee who is a nonlicensed person as described in this
subdivision.
  SEC. 2.  Section 50704 of the Financial Code is repealed.
  SEC. 3.  Section 50707 of the Financial Code is amended to read:
   50707.  (a) This chapter shall remain operative until June 30,
2005, on which date it shall be repealed, unless a later enacted
statute extends or deletes that date.  The purpose of this provision
is to allow the Legislature to assess whether this chapter (1)
increases or decreases the protections and remedies for consumers of
brokerage services compared to provisions of the Real Estate Law
applicable to mortgage brokerage activities; and (2) increases or
decreases the cost to the state of regulating mortgage brokerage
activities.
   (b) On or before December 31, 1999, the Secretary of the Business,
Transportation and Housing Agency shall conduct a study of the
matters referenced in subdivision (a) of this section, and deliver a
report summarizing the findings of the study to both the Assembly
Committee on Rules and Senate Rules Committee, which shall refer the
report to appropriate policy committees.  The report shall be
prepared from then existing agency resources.
   (c) On or before December 31, 2002, the Secretary of the Business
Transportation and Housing Agency shall prepare a second report,
which shall:  (1) update the findings of the report due December 31,
1999, and (2) report, for the years 2000 and 2001, the number and the
aggregate principal amount of closed residential mortgage loans
secured by residential real estate in which licensees provided
brokerage services pursuant to this chapter.  This report shall be
prepared from then existing agency resources.
